Real estate industry members should be cautious about drawing broad conclusions from current disruptions in the Greater Boston apartment market.
First, market softness appears localized. Greater Boston’s overall rental vacancy rate is north of 7 percent, as calculated by the Massachusetts Housing Partnership using CoStar data, but more fine-grained indicators show price declines appear worst in high-priced neighborhoods.
Year-over-year changes, also calculated by MHP, show rents are down most in Alewife (a 9.4 percent drop), downtown Boston (6.3 percent) and the Seaport/South Boston (6.5 percent).
Second, rents remain relatively durable in student-heavy Allston/Brighton (down 0.6 percent) and Fenway/Mission Hill (2.7 percent lower), as well as in working-class areas like East Boston/Chelsea (down 0.9 percent) and Gateway Cities like Taunton and Lowell (both saw 3 percent increases). The possibility that some Massachusetts renters are moving in with friends, relatives or otherwise doubling up in apartments also muddies this picture.
Third, the region’s housing markets have been rocked by three major trends: rich city-dwellers using their wealth to buy a feeling of safety by purchasing homes in destinations like Cape Cod; well-heeled suburbanites putting their downsizing plans on hold; and legions of more ordinary first-time buyers deciding to jump into the market, enabled by record-low mortgage rates and a sudden increase in their savings as vacations, dinner dates and other forms of consumer spending were put on hold by the pandemic.
Time will show how durable these trends are once the pandemic is defeated. But it is notable that the trends that fueled the last major round of urban-to-suburban flight in Massachusetts in the 1950s through the 1980s are not present today. Boston’s public schools may still largely be a mess, particularly when compared to their suburban peers, but the worst of the racism, social strife and corporate growth patterns that kept homebuyers out of cities during that period simply does not exist today.
The region’s urban core is no Potemkin village; it is built on very real and tangible advantages that will continue to attract and retain top talent and the firms and workers who service them. And the cavalcade of new developments entering construction or permitting right now shows many are willing to bet billions of dollars on those strong fundamentals.
But one thing the rental market’s current weaknesses should loudly demonstrate is the plight faced by small landlords living under the state’s eviction moratorium. Legislators currently trying to find an answer to what comes after the moratorium must remember softness anywhere in the market creates a drag on the entire sector, reducing landlords’ ability to absorb large costs like non-paying tenants. If the state means to force landlords to retain these delinquent tenants to avoid a social crisis, they must provide compensation to prevent a mass sell-off of multifamily assets.
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